OECD slashes global growth forecast into 2014

The global economy will expand 2.7 percent this year and 3.6 percent in 2014, according to a revised estimate from the Organisation for Economic Cooperation and Development. The international economic organization previously forecasted the world economy to expand 3.1 percent this year and 4 percent in 2014.

The organization cited underlying weaknesses in emerging markets as the biggest reason for the revised figures. India’s growth forecast was cut from 5.1 percent to 3.4 percent this year, as the world’s ninth largest economy struggles with a currency crisis. India’s economy will grow 5.7 percent in 2014, down from an initial estimate of 6.6 percent. Brazil’s growth forecast was cut from 2.9 percent to 2.5 percent this year and from 3.5 percent to 2.2 percent in 2014.

“Most of the emerging economies have underlying fragilities that mean they cannot continue growing as they used to,” said Pier Carlo of OECD. “They used to be an important support engine for global growth in bad times. Now the reverse is true and advanced economies can’t be said to be in very good times again.”

China will remain the best performing emerging market this year and next. The Chinese government is adjusting policy to meet the new demands of the global economy. China’s GDP will expand 7.7 percent this year and 8.2 percent in 2014.

The Paris-based organization raised its outlook on advanced economies. Japan’s GDP will expand 1.8 percent this year and 1.5 percent next year, while the euro area will contract 0.4 percent this year, less than the previous estimate of 0.6 percent. The euro area should return to growth in 2014 at a rate of 1 percent. The outlook on the US is broadly consistent with the previous forecast.

The revised forecasts show the global economy is still struggling from the effects of the 2008 financial crisis. However, the OECD remains optimistic growth can endure well into 2015, when the global economy is expected to expand 3.9 percent.

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